Winston Company_Incremental analysis
accountguru
WinstonCompanymanufactured5,000 unitsofacomponentpartthatisused initsproductand incurredthe followingcosts:
Directmaterials | 35,000 |
Directlabor | 25,000 |
Variablemanufacturingoverhead | 20,000 |
Fixedmanufacturingoverhead | 18,000 |
| 98,000 |
Anothercompanyhasofferedtosellthesamecomponenttothecompanyfor$17.50 perunit.Thefixed manufacturingoverheadconsistsmainlyofdepreciationonequipmentused tomanufacturethepartand wouldnotbereducedifthecomponentpartwaspurchasedfromtheoutsidefirm.Ifthecomponentpart is purchasedfromtheoutsidefirm, WinstonCompanyhastheopportunitytouse thefactoryequipment
toproduceanotherproductthatisestimatedtohaveacontributionmarginof$19,000
Instructions
Prepareanincrementalanalysisforthismakeorbuydecision.Shouldthecomponentbemadeor purchased?
- 10 years ago
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- winston_company_incremental_analysis.docx